Bob's Gold Price Column

Observations on the market action and the implications of the gold and silver markets.

Gold Price per Ounce in Euros

Wednesday, May 17, 2006

There is No Gold Bubble

These are items the US mass media and financial media do not want you to know about:

The production of gold in the world is substantially less (about 1500 tons per year) than the amount being bought. It has been that way for years. Where is all that extra gold coming from?

There is a huge short position in gold that was slowly put on over years and years to artificially depress the price of gold, to artificially depress interest rates in the US, to artificially keep the US economy going long after it should with out a healthy correction of all the excesses built up in the economy (read massive amounts of debt).

What is currently a big driver of higher gold prices is the gold shorts trying to get out of their short positions. This is going to take years as total short positions are about 10,000 tons worth.

There is no bubble in the gold and silver markets because there is no excess speculation going on in the gold and silver markets. Gold and silver market bubbles are years away from now. Sentiment indicators are very bearish (which is very bullish in reality) for gold, silver and the shares. Most people in the English speaking world can not understand why anybody would want gold and silver because they can not understand what anybody would do with the stuff. That is like sayiing why would anybody want real money (which gold and silver are) because they can not understand what anybody would do with real money. Most people in the English speaking world have been brain washed over a number of generations now into valuing digital token bits on some company's or government's hard drive (which they have little control over) over real gold and silver. Most US dollars, Euros, mutual fund shares, stock shares, bonds are nothing but digital bits on a hard drive in some computer somewhere. The entities that actually own, have real control over, the hard drives actually own all those digital US dollars, Euros, mutual fund shares, pension funds, stock shares, and bonds. Most in the English speaking world have been conned into giving up real ownership of the value they produce every week, conned into putting it into the control (real ownership) of other entities for safe keeping. Conned into believing that they do not have to think or worry about or work at their future retirement and healthcare funds. That those are all being taken care of by entities that they can trust. Well, who takes better care of property? The owner or a non-owner? There are hundreds of millions of people that are in for a rude awakening when they realize they have had massive amounts of value stolen from them. Gold and silver, that you actually own because you actually control it, are the ultimate safe store of value.Yes, it is a radical idea for most English speaking people to actually go out and buy the actual metal. They are quite uncomfortable with this idea. Which is another reason why there is no bubble in the gold and silver markets. And, there is only a tiny minority of people in the English speaking world that actually take responsibility for themselves and the safe keeping of their own wealth, that are storing a large percentage of their wealth in gold and silver right now. Which means there is no bubble in the gold and silver markets.

There should have been mass liquidation of long gold positions on Tuesday. The open interest only went down a measley 1505 contracts to 342,608. There was no "massive liquidation" as the financial media would have you believe. There is no bubble because there are hardly any new specs to liquidate. What is normal in the past is to see OI rise 100,000 contracts on a $30-$50 up move. This type of thing is not happening any more. This reaction was just another huge short selling wave by the dumb or the market manipulators, riggers, managers.

From the BIS (Bank for International Settlement):"And last, the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful."http://www.gata.org/CentralBankCooperation.htm

There is no bubble. Gold and silver are about to take off to higher levels **days** from now. This reaction is going to be short, and sweat to those smart enough to be buying weakness.

Are they stupid or are they doing this on purpose:

"The seven large TOCOM gold shorts increased their net short position by a quite substantial 11,563 contracts on May 15 to a total of 201,365 contracts or 6,474,025 troy ounces. Goldman Sachs was the ring leader with an increase of 3,774 contracts to a total of 45,285 contracts or 1,455,944 troy ounces." - www.lemetropolecafe.com

Right now oil is about USD 70, up about 75% from 1980 highs of USD 40.Gold should be up 75% from its 1980 highs, also, or around USD 1,500.No way is there any bubble top in the gold and silver markets. Gold and silver have a long long way to go on the upside. And, it's going to take years.

If the gold and silver markets are confusing you, buy the Gold Rush 21 Conference DVD set. Then, what is going on in the markets will make sense to you.

Friday, May 05, 2006

Silver Bottom

Silver's reaction looks to have put in a bottom. If you measure silver's retracement to the December low, it put in an about 50% Fib retracement. If you measure silver's retracement level to the late August low of 2005, it put in an about 38.2% Fib retracement. The two levels are very close to each other; strong support. Silver can streak to the upside in a heart beat.

Gold can keep on moving higher since the US dollar did not stop at the 86 horizontal support level. It went down 8 days in a row and through it. Then had a little up day; then on Thursday had a good down day and new low to almost 85 on the USD Index. I don't think this much speed to the down side is what central banks had in mind.

ACU Asian Currency Unit

Single Asian Currency Comes a Step Closer to Reality

The Asian single currency, which so far only exists in the minds of economists and officials with international organizations, will take on more concrete reality soon. The Asian Development Bank plans to publicize the Asian currency unit (ACU), a notional unit of exchange based on a "basket" or weighted average of currencies used in the 10 ASEAN member countries plus South Korea, China and Japan, the Yomiuri Shimbun and others reported Friday.

Monday, May 01, 2006

Why the Gold Price Is Rising

"We have often talked of THE PERFECT STORM when it comes to outside markets fueling the prices of gold and silver. The clouds continue to darken on the horizon and are pitch black at Goldman Sachs and JP Morgan Chase, the key players in The Gold Cartel. For the dollar to be sinking, while US interest rates are making new highs for their moves, means all is not well in US financial market land. Planet GATA has seen this coming for some time. Planet Wall Street has a few shocks coming its way.

Meanwhile, as far as the gold market action is concerned, it could also not be worse for The Gold Cartel. Gold traded today like copper has for some time … going up steadily and VERY QUIETLY. Specs are somewhat hesitant to follow the move up, but there are few sellers. What is occurring is The Gold Cartel, led by GS and JPM, are trying to cover shorts, so there is not much for sale since they were the ones doing much of the selling for so many years. The other usual sellers in years past, the hedgers, have also withdrawn from selling (for the most part), so you have the bad guys trying to cover in somewhat of a vacuum.

This is exactly what MIDAS pounded the table on for a long time. This is what HAD TO HAPPEN at some point and it is occurring as Frank Veneroso predicted at the GATA AFRICAN GOLD SUMMIT in Durban, South Africa on May 10, 2001:

This is the key to the gold price at the moment and the main reason for why it is moving up so much. The Gold Cartel, and others, borrowed approximately half of the gold in the vaults of the world’s central banks, sold it into the marketplace to suppress the price, and invested the proceeds in various manners. They leased the gold from the central banks. The gold is technically owed back to those same banks.

The problem is there is a 1,500/2,000 tonne annual supply/demand deficit, which can only be met by MORE central bank selling, or leasing. But instead of selling, the bad guys are trying to cover shorts, adding to their own precarious situation. They are trapped and cannot cover their shorts without driving the price WAY, WAY UP. That is the process, long predicted by the GATA camp, which you see unfolding.

When you actually work with the numbers, what lies ahead is STAGGERING. How does one cover more than 10,000 tonnes of gold when mine supply is less than 2500 tonnes per year, and scrap supply is probably running around 800 tonnes per year, and the deficit is running at least 125 tonnes per month? YOU CANNOT … which is why the price of gold could do anything to the upside at any time.

Now, what the GATA camp does not know is how much of this 10,000 tonnes must be paid back with physical gold versus payments allowed to be made with cash. We also don’t know which central banks will demand they be paid back with physical gold, as they might be petrified to let their citizens know their gold is gone in the coming gold mania environment.

Yet, either way, the shorts have to cover short positions in the derivatives markets because their losses are MOUNTING. Whether they able to account for the leased gold by paying cash, or with physical gold, they want to stop the price bleedingof the short positions on their books, which is considerable and growing. Better to cover between $640 and $800 per ounce, than at $1800, which they might have to do in part anyway.

What we are looking at is unprecedented … a market that has a short position that is 4 to 7 times the annual supply for that market."